Santacruz Silver Mining (NASDAQ:SCZM) said its second-quarter operating performance improved across its portfolio, with higher silver and zinc output, while temporary export constraints in Bolivia delayed some sales into subsequent periods.
During the company’s Q2 results webinar, Executive Chairman and CEO Arturo Préstamo Elizondo said consolidated silver production rose 17% quarter over quarter and zinc production increased 7%. He attributed the silver increase primarily to the Bolivar mine, where production rose by 84,000 ounces as tons milled increased 11% and silver head grades improved 17%.
Operational gains across portfolio
Management said operating improvements extended beyond Bolivar. At Zimapán, silver recoveries improved 10%, while zinc head grades and recoveries each increased 9%. Caballo Blanco increased silver production by 6%, supported by a 5% improvement in silver head grades. Porco processed 15% more tons and reported a 21% rise in silver head grades.
San Lucas processed 22% more tons than in the prior quarter and increased silver production by 20%, according to Préstamo. Consolidated mining throughput rose 7% during the quarter.
Préstamo also pointed to the impact of capital investments at Zimapán, including flotation and flash-cell circuits. He said the investments are beginning to support improved recoveries for zinc, copper and silver. Management said Zimapán reached level 960 and that some stopes planned for the coming quarter are already in production.
Santacruz reported silver all-in sustaining costs of $21.87 per ounce, down 24% from the prior quarter. Préstamo said the reduction was driven mainly by better silver head grades, higher recoveries and a 7% increase in material processed across the company’s five operations. Higher copper and lead production also provided stronger byproduct credits, while lower sustaining capital and general costs reduced the all-in figure further.
Exports delayed revenue recognition
CFO Andrés Bedregal said the company generated strong underlying financial results despite a mismatch between production and sales caused by road blockades in Bolivia. The blockades lasted approximately 53 days, constraining concentrate exports while operations continued.
Bedregal said revenue rose 55% year over year, gross profit nearly doubled, adjusted EBITDA increased 74%, and realized mining margin per silver ounce sold climbed to just over $50 from about $16 a year earlier. Santacruz ended the quarter with $73 million in cash and highly liquid marketable securities.
However, sales volumes fell below production volumes because concentrate remained in inventory rather than being sold and recognized in revenue during the quarter. Préstamo said the affected inventory totaled more than 7,800 tons, including about 6,000 tons of zinc concentrate and 1,700 tons of lead concentrate. He valued the inventory at approximately $24 million.
As of the webinar, 97% of that inventory had been sold, recovering nearly $23 million, with the remaining roughly $1.5 million expected to be sold in the third quarter. Préstamo said concentrate inventory was returning to a normal range of approximately 2,500 to 3,000 tons. He also said final settlements related to Mexican shipments brought in more than $22 million that week, lifting the company’s treasury above $100 million.
Non-cash items and taxes weigh on net income
Reported net income was about $2 million in Q2, compared with approximately $28 million in the first quarter. Bedregal said the decline was largely due to a $15.8 million non-cash fair-value loss on contingent value rights held by Glencore and a $36.1 million income-tax expense.
The Glencore contingent value rights require payment only in months when average London Metal Exchange zinc prices exceed $3,850 per ton. Zinc averaged about $3,400 per ton in Q2, Bedregal said. Under IFRS accounting rules, however, the company must remeasure the potential obligation at each reporting date. At quarter-end, Santacruz had about $35 million recorded as a CVR liability. Monthly contractual payments are capped at roughly $1.33 million.
Bedregal said higher zinc prices that would trigger CVR payments would also result in materially higher zinc revenue and margins for Santacruz.
The tax expense included an impact from Bolivia’s shift away from a fixed official exchange rate. The official rate moved from 6.96 bolivianos per U.S. dollar to approximately 9.77 at quarter-end, creating taxable foreign-exchange gains in the local statutory financial statements of Santacruz’s Bolivian subsidiaries. Bedregal characterized the impact as a one-time event, noting that the new exchange-rate reference point has now been reset.
Growth projects and strategic priorities
Préstamo said Santacruz expects to receive permits for the Soracaya project during the third quarter and plans to begin small-scale production of approximately 300 tons per day by the end of the fourth quarter. Underground equipment has arrived at the site, while the company evaluates the optimal mine design and ramp configuration. Full production is targeted for next year, potentially by year-end, though management said the timeline remains subject to further planning.
Under the current mine plan, Soracaya could produce up to 3 million silver-equivalent ounces annually, with most of that output expected to be silver, Préstamo said.
The company also said it expects the Illapa joint operation agreement in Bolivia to be renewed through July 2043, subject to completion of Bolivia’s legislative and executive approval process. Management said the amended contract had cleared initial approvals and was moving through the remaining administrative steps.
Looking ahead, Santacruz plans to focus on Bolivar’s Q4 recovery, sustained cost control, continued growth at San Lucas and Soracaya development. Management also said it is evaluating accretive acquisition opportunities, with a preference for producing mines in familiar jurisdictions that generate more than 4 million to 5 million silver-equivalent ounces annually.
About Santacruz Silver Mining (NASDAQ:SCZM)
Santacruz Silver Mining Inc (Nasdaq: SCZM) is a precious metals company focused on the exploration, development and production of silver and gold resources. The company’s business centers on acquiring and advancing mineral properties, conducting exploration programs to expand resources, and operating or re‑starting mines to produce payable metal. As a publicly traded issuer, Santacruz reports results and project updates through routine regulatory filings and investor communications.
Operationally, Santacruz is primarily involved in the full cycle of mining activities that include drilling and resource definition, mine development and production, on‑site ore processing or concentrate production, and the sale of metal production to smelters and concentrate buyers.
